What is Filecoin (FIL) used for?

Filecoin is a blockchain-based marketplace for data storage. People and organizations who need space pay storage providers to hold their files, and the network checks with cryptographic proofs that the files are really being kept. Its token, FIL, is locked by providers as collateral and paid out as rewards. The network went live on October 15, 2020.

How does the Filecoin network work?

There are two sides. Clients have data to store. Storage providers run hardware and offer space. They agree on a deal that sets the size, price, length of time and collateral. Deals are negotiated off-chain and then published on the blockchain so the rest of the network can see and check them.

Data is stored in sectors, fixed blocks of 32 or 64 GiB. Each provider must submit proofs every day that it is still storing what it promised, a process the documentation calls Proof-of-Spacetime. Some providers specialize in retrieval, meaning fast access to data rather than long-term storage.

Anyone can join as a client or a provider, and no single company sets prices. Clients can look at a provider's track record before choosing one.

What is the link between Filecoin and IPFS?

IPFS, the InterPlanetary File System, is a set of open protocols for finding and moving data across a peer-to-peer network. Instead of asking for a file by its location, as a web address does, IPFS asks for it by a fingerprint of its content. Any node with a copy can supply it.

IPFS is a protocol, not a storage service, so nothing guarantees that someone keeps a file. Filecoin's blog calls it an incentive layer for IPFS: providers are paid to store data for an agreed period, and most Filecoin nodes are also IPFS nodes.

What is Filecoin storage mining?

Running a storage provider is often called storage mining, but it differs from crypto mining on networks like bitcoin. Instead of solving puzzles, providers earn block rewards in proportion to the storage they contribute and prove, which the network calls storage power.

To start, a provider must lock FIL as collateral. If it repeatedly fails to submit proofs, part of that collateral is burned, giving it a financial reason not to lose data. Providers earn FIL from block rewards on top of what clients pay them for deals.

What is Filecoin used for?

The documentation lists examples. The Internet Archive and the Shoah Foundation use it for preservation and backup. NFT.Storage uses it to hold NFT files and metadata. Audius and Huddle01 use it as storage for music streaming and video calls.

Since March 14, 2023, the Filecoin Virtual Machine has let developers run smart contracts on the network, starting with contracts written for the Ethereum Virtual Machine. That allows programs that control where and how long data is stored. It is one of many uses of blockchain beyond payments.